(Adds analyst comment in 7th paragraph and money market reaction in 8th, updates dollar in last paragraph)
By Ismail Shakil and Steve Scherer
OTTAWA, May 31 (Reuters) - Canada's economy expanded faster than expected in the first quarter and likely accelerated further in April, data showed on Wednesday, increasing the odds for another interest rate hike by the central bank.
The economy expanded at an annualized rate of 3.1% in the first three months of the year, Statistics Canada said, exceeding both analysts' and the central bank's expectations.
Real GDP was unchanged in March from February, better than a forecasted 0.1% decline, and likely rose 0.2% in April, the agency said.
The growth figures are the latest data illustrating the economy's resilience despite a series of interest rate increases. April inflation, released earlier this month, accelerated for the first time in 10 months to 4.4%.
"Both GDP and inflation are now outperforming the (central) bank's expectations, further raising the case for another interest rate hike as soon as next week," said Stephen Brown, deputy chief North America economist at Capital Economics.
The next policy announcement is due on June 7. Money markets are pricing in a 40% chance of a hike next week, up from 28% before the data, and they fully expect an increase of 25 basis points by September.
"I personally think next week is too early," said Doug Porter, chief economist at BMO Capital Markets. "But I think (the Bank of Canada) will sound a pretty loud warning bell that they could hike rates again."
Growth in the first quarter was more robust than the Bank of Canada's 2.3% annualized projection, and beat a median of analysts' expectation for 2.5%.
The central bank increased its key overnight rate by 425 basis points to 4.5% between March of last year and January. It has since kept rates on hold, but warned that they could go higher.
The economy benefited from favorable international trade and growth in household spending in the quarter ended March, while slower inventory accumulation as well as a decline in housing investment were among moderating factors, Statscan said.
Exports of goods and services, led by cars and light trucks, rose 2.4% in the quarter, outpacing a 0.2% increase in imports.
Canadian households spent more on new trucks, vans and sport utility vehicles and on semi-durables like garments in the quarter, while spending on non-durable goods declined slightly.
Spending also picked up for food and non-alcoholic beverage services and alcoholic beverage services, the statistics agency said.
In April, Statscan said increases in sectors including mining, quarrying, and oil and gas extraction and transportation and warehousing likely partially offset declines in the wholesale and retail trade and public administration sectors.
The Canadian dollar strengthened after the data but was still down 0.2% at 1.3630 to the greenback, or 73.37 U.S. cents, as oil prices fell. (Reporting by Ismail Shakil and Steve Scherer in Ottawa; Additional reporting by Fergal Smith in Toronto and Dale Smith in Ottawa; Editing by Toby Chopra, Bernadette Baum, Sriraj Kalluvila and Mark Porter)